Solar panels provide you with a great way to cut your energy expenses while reducing your carbon footprint. However, before you sign up for installation, we recommend that you review all possible incentives, tax credits, and rebates. Understanding all rebates can help you save the most money installing a solar energy system. Please find out more today with our team at Solving Solar.
Major Solar Incentives
Significant solar incentives make it easier for property owners to embrace renewable energy. In addition, reviewing all your possible options before purchasing solar panels allows you to keep your expenses under control. We understand that installation costs and supplies often feel prohibitive when it comes to solar systems for power. That’s why we make it easy for you to find all incentives that can reduce upfront costs.
Federal Tax Credit
The government currently offers a federal solar tax credit. This offer provides you with 26% credit on any solar panel system installed from 2020-2022. In addition, you can get a 22% credit for systems installed in 2023. Currently, the federal government does not have plans to offer credits past 2023. The government offers this federal investment tax credit for the year that you get your system installed and operational. The credit impacts the amount of money you have to pay for your federal income taxes.
State Tax Credits
You may also apply for a state tax credit for solar power systems. State credits lower the income tax you must pay to your state. However, depending upon the amount that you deduct from your state taxes, your federal taxes may increase.
Some areas offer additional state incentives to property owners. You can review the state incentives for renewables (DSIRE) database to ensure that you get access to all applicable benefits from the state tax credit in areas like California, Texas, and Washington.
Sometimes, residents get a partial rebate for the cost of installing a solar energy system. These rebates may come from:
- Your utility company
- Your local government
- Specific organizations running rebate programs
Rebates generally do not impact your federal tax credit. In most cases, these rebates are a one-time dollar reduction that makes it easier to pay for a solar power system. However, available rebates may change over time, impacting the price for solar equipment installation.
Solar Renewable Energy Certificates (SRECs)
SRECs provide you with a way to earn money just for generating solar power. You earn credits by producing solar energy and then get money from utility companies for these credits.
Utility companies need SRECs to meet the requirements of their Renewable Portfolio Standards (RPS). Many energy companies, like SCE and PG&E, generate enough SRECs on their own. However, some companies cannot.
In this situation, they purchase SRECs from other producers. This practice allows them to meet a set solar quota. Your SRECs involves the amount of energy recorded on your meter.
You can learn more about net metering with our team.
Performance-Based Incentives (PBIs)
Some utility companies offer PBIs. PBIs give you a flat-rate payment for each kWh (kilowatt-hour) that you generate with your solar equipment.
Generally, companies set the rate you receive for PBIs at the time of installation. Therefore, you don’t have to submit certificates to get payment for the PBIs. Instead, the compensation process should occur automatically.
What Is the Federal Solar Tax Credit?
The federal solar tax credit allows you to claim a credit on your income taxes. You get to claim a portion of the expenses associated with the installation of a solar photovoltaic (PV) system. Most solar panel systems are solar PV systems.
The government has taken steps to encourage the adoption of PV systems with the help of the IRS. However, the solar investment tax credit may not last forever. Currently, next year is the last year that you can claim this credit on your federal taxes.
Why Does the Government Offer Solar Panel Rebates?
The government offers solar rebates for several reasons. Primarily, the government wants to encourage the use of renewable energy. Lowering your tax liability indirectly allows the government to make it easier to use solar power.
The government may also offer tax exemptions to lower the cost to install and use solar energy. Unlike deductions, tax exemptions do not directly impact your taxable income. You can learn more about all applicable incentives when you contact our team.
Am I Eligible To Claim the Federal Solar Tax Credit?
You must meet specific eligibility criteria to qualify for a federal ITC. The government covers a portion of your expenses if you:
- Install your system before the end of 2023
- Use your system in the year of its installation
- Install the system in your primary or secondary home
Additionally, you must own the system and use financing or cash to finance it.
Steps To Apply for Federal Solar Tax Credit
To apply for a tax credit for the fees charged by solar installers, you need to:
- Figure out your total expenses
- Decide if you are a full-time or part-time resident of the house
- Review state credits and rebates
Make sure you review any property tax exemption before you apply. Then, include the charges on your 1040 form.
Can You Claim the Solar Tax Credit More Than Once?
You can only claim a solar tax credit for renewable energy modules once for each solar array. However, you may move a portion of your credits over to the following tax year. You may also apply for new credit if you live in multiple properties or install a new system.
Are Solar Rebates Taxable Income?
You do have to report any solar rebates you receive as taxable income. Therefore, failure to properly report your rebates may get you in trouble. You can learn more about rebates, tax credits, and more when contacting our Solving Solar team. We help you find installation companies in your area that can handle all your solar energy needs. Please find out more by contacting us today.
Get A Free Solar Panel Quote Today
If you’re ready to learn more about solar panels and how much you can save when you install solar panels at your home, you can use our free solar panel calculator or fill out our solar panel quote form today.